Three interesting reports came over the desk last week, during Fieldays Week, giving a snapshot of the current red meat sector, what the sector wants in place and what it should be aiming at.
First, the Ministry for Primary Industries (MPI)’s Situation and Outlook for Primary Industries (SOPI) report for the year ending 30 June 2017 was launched on the first day of Fieldays 2017 in Hamilton and is well worth a read. This shows that export revenue from the primary sector is expected to grow by 2.4 percent to $38.1 billion this year and jump by nearly 10 percent next year to $41 billion. Of that 23 percent was accounted for by $8.3 billion of exports of red meat and wool to customers around the world. China, the US, the EU (excluding the UK), the UK and Australia were New Zealand’s top five markets.
An interesting graph on page 14 shows MPI analysis shows more effort needs to be made on working with a certain range of products to ensure New Zealand achieves and maintains market premiums for different sheepmeat products. Those with a strong rating and positive premium include diced leg steaks, rack, loin chop, neck fillets, liver and boneless legs. Petfood is another area to target with consumers in countries like China increasing online petfood sales by 1,693 percent over the last five years.
SOPI notes that beef and sheepmeat volumes have fallen in the year to June 2017, compared with record levels last year, and are driving a fall in meat and wool export revenue for the year. However, prices for lamb, beef and venison are finishing the year much higher than previously expected, which has helped to offset some of the lost volume. With good pasture availability, thanks to plenty of rain, export revenue is forecast to recover to $9.1 billion over the outlook period due to rising prices and stable meat production volumes.
Even as Australia starts to rebuild beef herds and China opens its markets to other beef exporters, such as Brazil and the US, opportunities will continue for New Zealand exporters in China, says the report. These include exports of chilled New Zealand beef on a trial basis from 10 New Zealand meat plants. Export value of beef is provisionally logged at around $2.64 billion for 2017, rising by six percent to $2.8 billion by 2020. The US remains New Zealand’s largest export market for beef, accounting for 43 percent of export value.
Sheep numbers are forecast to continue to fall in 2017, mainly because of a fall in breeding ewe numbers and, farmers retaining stock for herd rebuilding. Export prices recovered strongly over the past six months, especially in the EU and UK, and lower Australian/NZ production. With plentiful grass, New Zealand farmers also have been encouraged to hold back stock until later in the year when they can take advantage of higher prices. Export value is provisionally pegged at $2.4 billion for 2017, forecast to rise by five percent to $2.5 percent by 2020. Production is forecast to stabilise as the sheep flock slows its decline and lambing percentages improve. Mutton exports will continue to decline.
China is the top destination for 20 percent of New Zealand’s sheepmeat exports and is expected to remain so. The re-opening of the previously major sheepmeat market, Iran, after 20 years is another positive signal for New Zealand’s meat exports says the report.
The venison herd is in the process of re-building and exports are forecast to decrease 6.8 percent to $170 million in 2017. Strong export demand for venison, along with declining supply is supporting higher prices, says SOPI. The major market is the EU, which took 57 percent of exports in 2017, followed by the US, Switzerland, UK and Canada.
Increased Government investment of over $90 million in the government’s Trade Agenda 2030 and $18 million in biosecurity are among the initiatives supporting the sector.
What do we want?
With one eye on New Zealand’s general election on 23 September, the Meat Industry Association and Beef + Lamb NZ (B+LNZ Ltd) have drawn together the sector’s new ‘manifesto’ – Blueprint for partnership with the New Zealand Government –for discussion with politicians and policy makers. This repeats a similar exercise three years ago. The 2017 document points out that the sector represents 3.2 percent of New Zealand’s GDP. The total value of red meat production was $10.4 billion, with exports of beef and sheepmeat worth $7.5 billion and domestic sales worth $2.9 billion. The sector employs 80,000: 59,000 directly and 21,000 indirectly.
The two organisations outline the key priorities for the sector over the coming years. These include: developing and telling the ‘Red Meat Story, continuing to invest in research and development; to improve sustainability of production; and to actively work with government and producer/industry groups nationally and globally to build support for trade liberalisation and tackling non-tariff trade barriers; supporting the enhancement of a world-leading regulatory system across food safety, animal welfare and biosecurity; and investing in high workplace productivity.
The document details a number of ways Government can work with the sector to achieve its targets in the areas of environment, animal welfare, food safety, trade, biosecurity, innovation, employment relations, immigration, health and safety and training.
It will be interesting to see how the politicians in the panel respond to the comprehensive document at the Red Meat Sector Conference at the end of July.
What should we be aiming at? Consumers …
Finally, KPMG’s global head of agribusiness Ian Proudfoot has authored another in its thought-leader series: Agribusiness Agenda 2017: ‘recipe for action’.
As previously, his team has talked to 100 primary industry leaders to gather their thoughts on how to capture more of the $250 billion New Zealand’s products realise in-market and make a greater contribution to New Zealand’s prosperity. Proudfoot says the report highlights a significant difference in outlook compared to three years ago in the run up to the last election. Then, business leaders were focused on the impact of regulatory changes on the sector’s productive capacity. The reality has been that the global environment has changed dramatically in the last three years driven by shifts in community perception, customer expectations and emerging technologies. Now, the conversation is centering around consumer expectations.
Proudfoot notes that New Zealand is the only developed nation that relies on growing biological products and selling them to the world to pay for schools, roads and hospitals.
The top 10 priorities for leaders were: world-class biosecurity; creating NZ provenance brands, food safety strategic importance, delivering high speed rural broadband, innovate with customers, signing high quality trade agreements; delivering R&D incentives, increasing rural/urban understanding; developing future leaders and delivering market signals to producers.
The biggest increases in priority scores were for engaging more widely with community (up 10 places since 2016), tacking synthetic and alternative forms of protein (up 15 places), increasing rural/urban understanding (up 15 places), umbrella body to unify industry voice (up two places) and initiating GM field trials (up three places).
The Agenda features 110 action items drawn from over 250 ideas provided by industry leaders, helpfully provided with icons identifying the ‘responsible entities’ best placed to put them into action. The ideas cover: the need for a values-led framework for the industry, recruiting and training the best talent, rapidly deploying leading-edge technology, exploring new business models, getting closer to customers, leveraging the best ideas in the world and telling authentic stories to all.
Maintaining world-class biosecurity remains the highest priority for industry leaders. One theme noted by Proudfoot is managing consumer relationships, with KPMG noting leaders’ priority attached to provenance branding, co-innovation with customers, embedding resources (including people) into export markets and developing a New Zealand integrity mark. Another is alternative proteins, which KPMG notes are set “to become a material part of the global diet”.
“We ignore these technologies at our peril,” says Proudfoot.
Other themes emerging from the Agribusiness conversations included: the need for development of New Zealand’s own unique food culture; the need for high quality trade agreements; the bold action needed on swimmable water; the evolution of discussions around biotechnology towards a regulatory framework needed to manage their application; and leveraging data.
Taking the three documents together, one could read that the sector is currently doing relatively well, has well-founded thoughts about what support it needs from Government, but that there are areas which now need special attention, including a focus towards consumers (cue: Red Meat Story) and also an urgent need to show that industry is tackling and/or countering rapidly evolving alternative proteins.